Some CDs are paying 5% or more now but will these rates continue to rise? We asked 4 experts what will happen ... - MarketWatch

Should you get a CD?

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Americans are showing renewed interest in CDs, as APYs continue to climb, with some CDs like those from Marcus by Goldman Sachs and Bread Savings paying 5.05% and 5.25%, respectively. (See some of the highest CD rates you can get now here.) But will CD APYs continue to climb, or are CDs at a peak level for now? We asked pros to weigh in.

Pros say a lot of this depends on what the Fed does going forward (its next meeting is this week)  — and along those lines, some think that the Federal Reserve has paused its program of increasing interest rates. “Since CD rates usually follow the path of the Federal Reserve policy, it’s a fair conclusion to say rates should not increase, or at least much more, from where they currently are. Something that could change this outlook would be a renewed surge in inflation, which could force the Federal Reserve to go back to regularly hiking interest rates,” says certified financial planner Chris Diodato at WELLth Financial Planning.

For his part, Greg McBride, chief financial analyst at Bankrate, says, “for maturities longer than one year, yields peaked months ago and haven’t shown any recent improvement. Maturities of one year and less could climb if the Fed hikes rates again, but the Fed is unlikely to raise rates enough to push CD yields to 6%.” (See some of the best CD rates you can get here.)

Others think some rises could come in the future, as core inflation is still high and unemployment is still low. “That would indicate the Fed will continue to raise rates. There was talk of the Fed pausing but with inflation rising again after those options were made, that makes me unsure what the Fed will do next,” says certified financial planner Tara Unverzagt at South Bay Financial Partners. “Things could change any minute. My sense is that once core inflation starts to come down, the Fed is apt to hold steady until inflation is below 4%,” says Unverzagt. 

What should you do if you’re interested in CDs now? 

Given the current climate, McBride says now is a good time to be locking in CDs with maturities of one year and longer. “The ability to lock in yields of 4.5% and higher for the next several years is an attractive opportunity for conservative investors,” says McBride. With the top-yielding CDs the best we’ve seen in 15 years, CDs are back on the radar for savers and retirees. “Retirees and those approaching retirement can secure a predictable stream of interest income,” says McBride.  (See some of the best CD rates you can get here.)

CDs can also be a great tool for budgeting for future purchases. “I have a client who is buying a new roof in 2025. We pulled the cost of the roof out of her stock portfolio and put the funds in a 2-year CD. Now she has peace of mind knowing there is money set aside for her roof that isn’t subject to the ups and downs of the market. In addition, she’ll be earning close to 5% each year, which will help defray some of the cost,” says Diodato. 

And consider this: Because CDs are insured by the FDIC, they’re generally considered safe investments. “Given the rise in interest rates, the returns are stronger than in the recent past and less risky than putting money into equities. They may be a good way to diversify a portfolio,” says Bobbi Rebell, founder of Financial Wellness Strategies and author of Launching Financial Grownups.

But keep in mind that if you lock into a CD with a given rate of return, you’re locked into that rate. “That can be great if it’s more than you would get in other investments, but if other investments outperform or if rates go up and in turn CD rates go up after you’ve locked in at a given rate, you don’t have the funds available to buy rates at the higher rate of return,” Rebell adds.

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Some CDs are paying 5% or more now — but will these rates continue to rise? We asked 4 experts what will happen ... - MarketWatch
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